Chicago Proposes Extra Tax, Looser Regulations For Short-Term Rentals And B&Bs

Direct lodging companies like Airbnb or HomeAway compete with hotels for tourist dollars (even if hotel rooms are sometimes listed on the sites) yet at first didn’t impose lodging taxes on guests. Now some cities require it, and the listing sites collect and remit those taxes to cities. In Chicago, though, mayor Rahm Emanuel has proposed an additional tax on top of that for online short-term rentals, vacation rentals, and traditional bed and breakfasts.

An extra 2% charge on all direct rentals would raise an estimated $1 million for the city, which the mayor said in a statement would go toward affordable housing. That’s appropriate: in some cities, residents are concerned about short-term rentals not only gobbling up residential housing stock, but disrupting life in neighborhoods that had no vacation party houses when homeowners and residents moved in.

In addition to the new fee, Emanuel’s proposal would require hosts to register, to track how many nights per year they rent to guests and also to ensure that the properties have liability insurance. Sites that list short-term rentals would also have to register with the city, as “short-term residential rental intermediaries,” and give data about the rentals they facilitate to the city. It’s not clear whether they would in turn be required to force properties in Chicago to register with the city.

Current regulations in Chicago, which most people ignore, requires people who welcome vacationers to become licensed as an actual B&B. Under this proposal, that requirement wouldn’t kick in until someone rented their property out for 90 days in one year or more.

A spokesperson for Airbnb, the leading site in this field, had an interesting talking point ready for the Chicago Tribune, asking why short-term rentals should have a higher tax rate than luxury hotels.

Chicago seeks to add Airbnb fee, track units [Chicago Tribune]